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Sunday, September 11, 2011

Stocks to watch: MAHB, telcos, Benalec, BDRB (Edge)

Investors will have to brace for more downside pressure again the week ahead, starting Sept 12, after US stocks tumbled 2.69% on Friday on mounting worries about Europe’s debt crisis.

US stocks fell after the top German official at the European Central Bank, Juergen Stark resigned in protest of the bank's bond-buying programme, which has been a major tool in fighting the region's debt crisis.

Reuters reported Stark’s resignation raised questions of policymakers' ability to deal with Europe's debt crisis, a problem that could engulf a world economy already teetering on the brink of recession.

The Dow Jones industrial average fell 303.68 points, or 2.69%, to 10,992.13. The Standard & Poor's 500 Index dropped 31.67 points, or 2.67%, to 1,154.23. The Nasdaq Composite Index dropped 61.15 points, or 2.42%, to 2,467.99.

The ECB has been buying up sovereign bonds to help hold down borrowing costs in some debt-strapped euro zone members, and the programme has been considered critical to arresting market contagion. The resignation of Stark, who will step down by the end of the year, may deepen the gulf between the ECB and German guardians of central banking orthodoxy.

The external headwinds are expected to continue to weigh down markets, where Malaysia also has not been spared.

On the outlook for Bursa Malaysia, the head of retail research of Affin Investment Bank Dr Nazri Khan said the FBM KLCI was likely to dip further next week.

This negative outlook was amidst rising volatility with a combination of slow external growth and heavy sovereign debt reinforcing fears that the world's biggest economies are sliding back into recession, he said.

“We are pegging 1,450 and 1,430 as the likely FBMKLCI support for any immediate downside,” Nazri said.

Stocks which could see trading interest are Malaysia Airports Holdings Bhd (MAHB), telcos, Benalec Holdings Bhd and BANDAR RAYA DEVELOPMENTS BHD [] (BDRB).

MAHB has put on hold the proposed implementation of new rates for the international passenger service charge and also aircraft landing and parking charges.

MAHB said on Friday it was advised by the Transport Ministry that the charges, which were to be implemented on Sept 15, “be put on hold until further review by the government”.

Telcos are incurring the wrath of the authorities following their plans to go ahead to impose the 6% service tax on prepaid mobile phone users effective Sept 15.

Even Prime Minister Datuk Seri Najib Tun Razak said the move was not approved by the government. He added: “The move to impose the service tax on consumers is very unpopular and difficult to accept”.

Can consumers expect the telcos to back down from the growing unpopular plan? As for the telcos, they have been absorbing the service tax which was introduced in 1998.

Meanwhile, Benalec announced it is in the midst of bidding for land reclamation projects with a combined estimated contract value of approximately RM8 billion and its current unbilled orderbook stands at RM590 million.

The Edge weekly reports that BDRB’s proposed related-party transaction involving its flagship asset, the Bangsar Shopping Centre, has turned the spotlight on its 18.88% shareholder Ambang Sehati Sdn Bhd, because persuading the minority shareholders to accept the offer may prove a stiff test for the private company.

Already, RAM Rating Services cautioned Ambang Sehati’s acquisition of BDRB’s investment PROPERTIES [] would have a mixed impact on the group’s credit standing.

“While the potential divestment may be an immediate positive to BRDB’s financial profile, it would exert a negative effect on its business risk profile over the longer term,” it said.

SIME DARBY BHD [] announced on Friday it had completed the acquisition of 237 million shares of Eastern & Oriental Bhd and 60 million loan stocks of 65 sen each – representing 30% -- for RM766 million. The settlement is on Sept 14.

Syarikat Air Selangor Sdn Bhd has filed a statement of claim for RM1.054 billion on the Selangor government as compensation under the terms of the concession agreement.

PUNCAK NIAGA HOLDINGS BHD [] said the compensation was due to it from Jan 1, 2009 to March 31, 2011 under the concession agreement dated Dec 15, 2004. The agreement was between Syabas, the Federal Government and the Selangor Government.

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